Mumbai: Global private equity (PE) firm KKR and Co. Lp will focus on investing in distressed assets and finance infrastructure projects in India, co-founder Henry Kravis said on Thursday.

“I am more excited about India than ever before. There is a dislocation in the Indian market," Kravis said in a media briefing. “There are some very good companies and what is wrong with them is that their capital structure is impaired and we can help them out."

By dislocation, Kravis was referring to India’s diminished attraction as a preferred destination by overseas investors because of a faltering economy, the trouble local firms are facing in raising funds, scanty public offerings and the capital constraints of banks as they grapple with increasing bad loans.

“The days of 20-25% net returns are over," Kravis said. “We have to find other places to put capital, along with our core business of private equity. We offer flexibility."

In India, KKR has done two buy-out transactions so far. Kravis said doing buy-outs is “really tough" in emerging markets, more so in India due to the oft-found family-owned business structure.

“KKR is a solution provider. Companies need debt, equity, they want to making acquisitions and need capital for that," Kravis said. “We want to play the role of a partner who can help anywhere in the capital structure."

The investment firm is active in PE transactions in India and also offers debt through its two non-banking financial companies, one of which is focused on real estate. Its new India-focused debt fund, Alternative Credit Opportunities Fund-1, is ready to start investments.

An expert said it’s a good strategy for an investor to have multiple instruments to cater to the various funding requirements of firms though this approach is not an easy one.

“One needs to integrate these strategies without getting carried away as each business (PE or debt or both) has its own logic, and can’t be replaced," said Harish H.V., partner at Grant Thornton, a business consulting firm.

Only deep pocketed investors can afford to be a multi-asset solution provider, according to Harish. “No market can be a pure debt market, equity has to be there," he said. “Debt demand in India has been triggered by banks’ inability to lend."

For transactions that call for specialized financing, KKR will use so-called structured finance through its KKR Special Situations Fund Lp, a $2 billion global purse focused on distressed and event-driven investments. Transactions in India will be made out of this fund, Kravis said.

“Indian banks will have to replenish capital and therein lies an opportunity for us," he said. “We may (even) consider taking a pool of non-performing loans from Indian banks." KKR may also infuse capital in stressed firms and get banks to increase the loan tenure and not write it down as a bad loan, he said.

KKR will also look at infrastructure financing in India and could invest in “ports and pipelines", said Kravis. These investments will be drawn from the global fund.

In 2012, KKR’s infrastructure fund had a final close on over $1 billion, which, in addition to the $1.3 billion of already committed infrastructure-related separate accounts, brings total capital committed to infrastructure to $2.4 billion.

KKR has been active in India since 2006, with total investments of nearly $1.6 billion in firms including Aricent Inc., Bharti Infratel Ltd, Coffee Day Resorts Pvt. Ltd, Dalmia Cement (Bharat) Ltd, Magma Fincorp and TVS Logistics Services Ltd, Alliance Tires Group and Gland Pharma Ltd.

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